Small-Cap Screen Using Profitability, Rounded Price Shape, and Moving Averages

Summary

This post proposes a stock-selection screen combining a market-cap ceiling, companies described as having no losses, a rounded price pattern, and at least five moving averages. Its stated process checks whether price trades among the selected averages, then applies the rounded-shape and size conditions. The post later adds a free-float market-cap ceiling to the final logic. Suggested moving-average windows include short, medium, and long horizons.

The rationale is that moving averages summarize price behavior, a rounded formation may precede reversal, and profitable firms may have more stable operations. However, the post does not define a reliable algorithm for detecting the shape or specify how the averages must converge. Its sample code is incomplete and does not clearly implement all stated filters, and no backtest or performance evidence is supplied. The author notes sensitivity to average selection, pattern-classification errors, and omitted stocks, and suggests further fundamental and size filters.

Key ideas

• The screen combines a small market-cap threshold with profitability and price-pattern conditions.
• It calls for price behavior around at least five moving averages and a rounded formation.
• The final logic also includes a free-float market-cap filter.
• The post does not precisely define the pattern test, and its sample code is incomplete.
• No backtest evidence is provided to support the strategy rationale.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.